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Facts: The Philippine Airlines (PAL) is engaged in the air transportation business under a legislative franchise, Act 4271,

nchise, Act 4271, wherein it is exempt

from the payment of taxes. The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Edu, pursuant to Section 8,
Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code. On the strength of an opinion of the Secretary of Justice
(Opinion 307 of 1956), PAL was determined to have not been paying motor vehicle registration fees since 1956. Sometime in 1971, however,
appellee Commissioner Romeo F. Edu, issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act
4136 were paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees of its motor vehicles.

After paying under protest, PAL through counsel, wrote a letter dated May 19, 1971, to Commissioner Edu demanding a refund of the amounts
paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes
from the payment of which PAL is exempt by virtue of its legislative franchise.

Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211,
March 30, 1970) to the effect that motor vehicle registration fees are regulatory exactions and not revenue measures and, therefore, do not
come within the exemption granted to PAL under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner
Romeo F. Edu and National Treasurer Ubaldo Carbonell.

The Trial Court dismissed. CA affirmed the decision. Hence this appeal.

Issue: Whether registration fees as to motor vehicles are taxes to which Philippine Airlines is exempt? /What is the nature of the motor vehicle
registration fees?

Held: Yes, they are in the form of taxes hence PAL is exempt.


It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61 of the Land Transportation and Traffic Code that the
legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the
construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of the administering agency. On the
other hand, the Philippine Rabbit case mentions a presumption arising from the use of the term "fees" which appears to have been favored by
the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 referring to taxes other than those
imposed on the registration, operation or ownership of a motor vehicle (Sec. 89, b, Rep. Act 4136, as amended). Fees may be properly regarded
as taxes even though they also serve as an instrument of regulation.

Taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148). If the purpose is primarily revenue, or if
revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle
registration fees. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent therefrom that the legislators had in
mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee."
Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the
registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur . . ." making the intent to
impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax," where the law could have
referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle
under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be
an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special permit fees for certain types of motor vehicles (Sec. 10) and
additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-
raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and chauffeurs' license fee. Such
fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of Sec. 61.

NATURE AND PURPOSE. We rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic
Code are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the
operating expenses of the agency administering the program.

(Maybe asked as to WON PAL is entitled to a refund) NO.

THE REGISTRATION AND LICENSING OF MOTOR VEHICLES. The claim for refund is made for payments given in 1971. It is not clear from the
records as to what payments were made in succeeding 1968 and April 9, 1979, were correctly imposed because the tax exemption in the
franchise of PAL was repealed during that period. However, an amended franchise was given to PAL in 1979. PAL's current franchise is clear and
specific. It has removed the ambiguity found in the earlier law. Under Section 13 of Presidential Decree No. 1590, PAL is not exempt from the
payment of any tax, fee, or other charge on the registration and licensing of motor vehicles. Such payments are already included in the basic tax
or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590 and may no longer be exacted. Hence, the prayer for refund of
registration fees paid in 1991 is DENIED.